F&I Profits and Benchmarks – Is Your Store Underperforming?

F&I should be a very consequential profit center for your store. Here are some benchmarks you can use to tell if you are underpforming – and some tips if it seems like you are.

Key Benchmarks

Over 50% of your deals are financed in-house

For financed deals, your average funding/dealer reserve is 4.4% or more of the amount financed

Backend products should be sold on 35% – 50% of all financed deals and should add, on average, about 50% profit on those deals; across all financed deals, backend sales should add an additional 24% – 28% or more profit based on total dealer reserves

Underperforming?

If your store is not seeing these results, it would be easy to blame your Finance Manager…and you might be right…but often, there is a much more insidious, and potentially more difficult to correct cause.

F&I success starts before the customer ever arrives at your store and the ultimate outcome is often determined before the finance manager ever has a chance to meet the customer.

Does your website advertise in-house financing? You don’t want to give the customer a reason to start shopping financing. Make it clear that you have multiple financing options available. Give your customers a chance to get pre-approved right on your site. (Dealers properly using using pre-approval tools like CreditMiner are seeing an incremental 15% – 20% financed sales per year.)

Once the customer arrives at your store, does your store environment encourage the right mindset for F&I? Are your salespeople trained to prepare that customer for the F&I conversations that are to come?

If you have signs advertising low rates, your have already mitigated your ability to maximize F&I success. If you feel compelled to display rates at all, and we would recommend that you advertise payments rather than rates, make sure that rates you advertise allow you to get at least 6% dealer reserve on prime consumers – and make sure that “on qualifying credit” is very visible.

Does your sales team truly sell your products? In general, territories are reasonably protected by franchise. If your sales person has really caused the customer to fall in love with your product, your prospects of F&I success go way up. Getting this product elsewhere will be inconvenient, at best. The customer can’t just go next door and get the same thing at a different price or rate.

Your sales people need to be stressing the convenience of being able to get product, service financing and all the optional products and services they may need at your location. Sell the value of ease.

The sales team should introduce the value of extended service agreements and other backend products, but should not give pricing. They will also make it clear that the customer can get their financing down at your store.

When the ugly question comes up, “Can I get 3.9% on this…I saw that advertised down the street?”, the general framwork of the answer should be, “Gee, that is something I just don’t have the answer to, but our Delivery Coordinators will be able to work with you on that once we have found exactly the piece of inventory you want. What kind of payment were you looking for? I can let our coordinator know.”

Until credit has been run, debt to income established and the overall credit profile reviewed, there is no good reason to make promises or establish expectations. Doing so just stands in the way of F&I success and makes your finance manager’s job nearly impossible.

Only after you have established the pre-F&I processes and procedures that maximize the probability of success are you able to judge your F&I department against the success benchmarks.

You maximize your F&I profits when you treat F&I as a full sales lifecycle event and not just a single point, isolated profit center